TSM 2026 Q1

Full-year 2026 revenue growth outlook raised to above 30% in USD terms, up from prior guidance levels, reflecting stronger-than-expected AI and leading-edge demand.

“we maintain strong confidence for our full year 2026 revenue to now grow by above 30% in U.S. dollar terms”— C.C. Wei, Chairman and CEO

Q1 revenue of USD35.9B came in slightly ahead of the company's own Q1 guidance, driven by strong leading-edge process demand.

“revenue increased 6.4% sequentially to USD 35.9 billion, slightly ahead of our first quarter guidance”— Wendell Huang, CFO

Q2 revenue guidance implies 10% sequential growth versus Q1's 8.4% sequential growth, suggesting the sequential growth rate is accelerating into Q2.

Per Wendell Huang, CFO

Long-term AI accelerator revenue CAGR guidance nudged up toward the higher end of the previously stated mid-to-high 50% range amid continued strong customer demand signals.

“it is toward higher 50s of CAGR that we observe”— C.C. Wei, Chairman and CEO

AI demand is described as accelerating further, with the shift from generative to agentic AI driving another step-up in token consumption and computation needs.

“The shift from generative AI and the query mode to agentic AI and command and action mode is leading to another step-up in the amount of tokens being consumed”— C.C. Wei, Chairman and CEO

Memory price hikes have begun softening demand in price-sensitive smartphone and PC segments, while high-end smartphones continue to perform better, benefiting TSMC's mix.

“We did see a little bit softer market”— C.C. Wei, Chairman and CEO

Q1 gross margin rose 390 basis points sequentially to 66.2%, an acceleration driven by cost improvements, higher capacity utilization, and favorable FX, versus prior quarter's level.

“Gross margin increased 3.9 percentage points sequentially to 66.2%”— Wendell Huang, CFO

Actual Q1 gross margin exceeded the high end of prior guidance by 120 basis points due to higher-than-expected utilization and better cost improvement efforts.

“our actual gross margin exceeded the high end of the range provided 3 months ago by 120 basis points”— Wendell Huang, CFO

Q2 gross margin guided to improve only 30 basis points to 66.5% at midpoint, a much smaller sequential gain than Q1's 390bp jump, as overseas fab dilution offsets utilization gains.

Per Wendell Huang, CFO

Management now expects 2-nanometer ramp-up to dilute full-year 2026 gross margin by 2-3%, a newly quantified headwind starting in the second half.

“we expect between 2% and 3% dilution for the full year of 2026”— Wendell Huang, CFO

Overseas fab ramp-up dilution to gross margin is forecast to widen from 2-3% in early stages to 3-4% in later stages as overseas expansion scales up.

“we continue to forecast the gross margin dilution from the ramp-up of overseas fabs in the next several years to be 2% to 3% in the early stages and widen to 3% to 4% in the latter stages”— Wendell Huang, CFO

N3 node gross margin is now expected to cross over to reach the corporate average margin level in the second half of 2026, a milestone improvement from prior dilutive levels.

“N3 gross margin is expected to cross over to the corporate average in the second half of 2026”— Wendell Huang, CFO

Rising prices for certain chemicals and gases due to the Middle East situation may newly pressure profitability, though the impact cannot yet be quantified.

“prices for certain chemicals and gases are likely to increase...there may be impact to our profitability, but it is too early to quantify the impact”— Wendell Huang, CFO

Q1 operating margin improved 410 basis points sequentially to 58.1%, an acceleration attributed to operating leverage from higher revenue.

“Operating margin improved 4.1 percentage points sequentially to 58.1% due to operating leverage”— Wendell Huang, CFO

2026 capital budget is now expected to land toward the high end of the prior USD52-56B range, up from a more central expectation, reflecting stronger AI-driven demand.

“We now expect our 2026 capital budget to be towards the high end of our range of between USD 52 billion and USD 56 billion”— Wendell Huang, CFO

Management expects total CapEx over the next three years to be significantly higher than the prior three years' USD101 billion, given strong conviction in the AI megatrend.

“we expect the CapEx in the next few years, in the next 3 years, will be significantly higher than the past 3 years”— Jen-Chau Huang, CFO

Breaking from historical practice of not adding capacity to a node once it reaches target capacity, TSMC is stepping up CapEx to add new 3-nanometer capacity across Taiwan, Arizona, and Japan to meet AI-driven demand.

“Historically, we do not add additional capacity to a node once it has reached its target capacity...we are now executing a global capacity plan to support the robust multiyear pipeline of demand for 3-nanometer technologies”— C.C. Wei, Chairman and CEO

TSMC plans to wind down its 6-inch Fab 2 and 8-inch Fab 5 (shifting the latter to gallium nitride) and reallocate that space to leading-edge applications, a new strategic shift in mature-node capacity allocation.

“we have a plan to wind down our Fab 2, which is a 6-inch fab; and Fab 5, which is an 8-inch fab; focus on gallium nitride and use available space to optimize the support for leading-edge applications”— C.C. Wei, Chairman and CEO

Management has become more cautious in business planning due to rising component prices in price-sensitive markets and new macroeconomic uncertainty stemming from the Middle East situation.

“the recent situation in the Middle East also brings further macroeconomic uncertainties. As such, we are being prudent in our business planning”— C.C. Wei, Chairman and CEO